12 May OCWEN Gets Crushed Behind New Banking Regulations

Federal and state regulators bury Ocwen Financial and its subsidiaries in accusations for deficient financial conditions and widespread servicing errors. The announcement was made by the North Carolina Commissioner of Banks, which resulted in the more than 20 mortgage regulators issuing Ocwen cease and desist orders.

The order prohibited Ocwen Financial and its subsidiaries from originating any new mortgage loans and acquiring any new mortgage servicing rights. This is to continue until Ocwen Loan Servicing and Ocwen Financial is able to manage their consumer mortgage accounts appropriately.

Such rulings make it evident that homeowners are in danger of being taken advantage of by mortgage companies. Let us take a detailed look at Ocwen’s situation and how it will effect homeowners.

The Story

The action against Ocwen was taken after years of federal and state regulations regarding the controversies against the company. Ocwen, the once well-known mortgage servicing company grew by leaps and bounds after the financial crisis.

It was at this time that it was caught for the violation of mortgage servicing standards by regulators. According to CFPB, substantial evidence was uncovered that clearly depicts that Ocwen has been engaged in systemic and significant misconduct and that too at almost every single stage of the process of service mortgage.

In a press release issued by Richard Cordraty, the Director of CFPB, said, “Ocwen has repeatedly made mistakes and taken shortcuts at every stage of the mortgage servicing process, costing some consumers money and others their homes.”

According to CFPB, Ocwen was involved in botching basic servicing functions and all of this was done by sending borrowers inaccurate monthly statements, mishandling insurance and taxes in escrow accounts and crediting payments incorrectly.

The CFPB alleged that mortgage servicing rights were sold to other servicers by Ocwen without fully correcting and disclosing errors which is against the mortgage servicing standards of 2014 enacted by CFPB. The organization further added that incorrect and misleading information was loaded into the proprietary technology system by Ocwen and it was later used to service loans to customers. According to CFPB, Ocwen did try to correct inaccuracies manually but ended up producing even more errors.

According to CFPB, there have been more than 580,000 complaints received against Ocwen since 2015 from more the 300,000 different borrowers.

CFPB has file a lawsuit against Ocwen in the US District Court for the Southern District of California which claims that the mishandling of insurance payments was also done by Ocwen, leading to a lapse in the coverage of more than 10,000 borrowers. Many of these borrowers were also pushed into force placed insurance.

The private mortgage insurance of borrowers was also not canceled by Ocwen which led to more than $1.2 million overcharging of the customers. The company, however, refunded the money later after the fact. According to CFPB, Ocwen was also involved in signing up and charging customers more for add on products deceptively. The company also failed in assisting the heirs of deceased borrowers, resulting in numerous foreclosures.

According to Ray Grace, the commissioner of North Carolina, “Ocwen has consistently failed to correct deficient business practices that cause harm to borrowers. We cannot allow this to continue.”

Ocwen’s Response

In response to the allegations, Ocwen called the lawsuit against them to be politically motivated and made a vow to fight against it in court. In a statement issued after the filing of lawsuit, the spokesperson of Ocwen said that the company strongly disputes the claim of CFPB that the practices of Ocwen have caused serious harm to consumers. In fact, it is opposite to the truth. John Lovallo, the spokesperson of Ocwen further added that the allegations made against Ocwen are unfounded and inaccurate.

Ocwen is not aware of any detailed review conducted by CFPB against the loan funding servicing files of Ocwen. He said that the lawsuit filed by CFPB is actually based on flaws in the review of data by CFPB and self-serving conclusions made about some isolated incidents where it was self-identified by Ocwen about how it can do better.

Ocwen further claimed that the allegations and the lawsuit filed by CFPB is not related to all the customers of Ocwen but just a few of the 1.3 million customers it has. It added that Ocwen has assured the CFPB repeatedly that any legal harm experienced by its customers will be remediated and many have already been reimbursed.

The Effects

The news made Ocwen’s stock price tumble to $2.43, a low of 55% per share by midday. This raised serious concerns on whether the organization will be able to survive or not. According to North Carolina’s Commissioner of Banks, Ray Grace, the future of Ocwen was in danger as the costs of reconciling the mistakes the firm has made on the escrow accounts is going to be so high that the future of the company is in doubt. The reconciliation is estimated to cost around $1.5 billion and it is far beyond the capacity of Ocwen to fund.

Ocwen Financial shares continue to plummet on regulatory concerns about the nation’s largest servicer of delinquent mortgages.

Ocwen has been trying to wrap up all of the outstanding regulatory and legal issues but the lawsuit will cripple the company further making its survival difficult. It is also subject to a consent order of 2013 to fix its servicing practices by the CFPB.

Furthermore, Ocwen is now been also prohibited to purchase any mortgage servicing rights, something it needs to keep its business functional and to grow further owing to the past consent orders in California and New York. According to New York regulators, the date when Ocwen can resume their purchase of servicing rights will be decided later.

Ocwen will be prohibited to cease any new mortgage servicing rights until it is able to reconcile all the escrow accounts and show clearly that all of the consumer funds are collected appropriately, calculated and also disbursed in time and accurately.

The future of Ocwen currently seems grim because of all the allegations and lawsuits against it after the cease and desist orders issued against it by 20 mortgage regulators.

While there are many mortgage servicers that are exceptionally honest in their work, some black sheep take advantage of their clients. If you too have fallen victim to any one of the tricks used by mortgage servicers, you should immediately get help from an attorney before matters get out of your hands.

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